There has been a decline in total yearly bankruptcy filings in the United States for the past six years. However, experts and analysts are predicting that thistrend may change in 2017. The Executive Director of the American Bankruptcy Institute, Samuel J. Gerdano, recently stated: “As the Fed raises rates in 2017 and the cost of borrowing increases, more debt-burdened consumers and businesses may seek the financial shelter of bankruptcy.” If the cost for businesses and consumers to borrow money increases, then it’s likely more of them will look to restructure that debt. Bankruptcy may be the best, and sometimes only, option for them to effectively restructure their debt and find a reasonable path forward.
Projections by CreditSlips also show a slight increase in bankruptcy filings nationwide.There are clear signs that this trend may impact many different industries in Colorado. While there are high profile store closing and corporate bankruptcies across many industries, Colorado has many sectors of the economy that are projected to grow as well.
Retail Bankruptcy in Colorado
The retail sector has provided many notable signs that bankruptcies may be on the rise. The bankruptcy and subsequent closing of Sports Authority was well documented in 2016. There are many more examples during the start of this year.
- C. Penney has plans to close 138 stores around the country in July 2017 with many of those locations in Colorado.
- Whole Foods, Gordmans, and Rue 21 have also announced plans to close retail locations in the state.
- PayLess ShoesourceInc will be closing 3 stores in Colorado as a part of their Chapter 11 Bankruptcy plan.
As the major retailers close stores around the country, the resulting job losses will certainly put additional pressure on many individuals to file for bankruptcy in Colorado as well.
There have been many high profile energy sector filings for bankruptcy in Colorado since 2015, as well as a number of corporate filings around the country that have impacted operations in the state. Emerald Oil, VenocoInc, Craig Energy, and Escalera Resources are all Colorado-based oil and gas companies that have declared bankruptcy in the last year. Peabody Energy, the largest coal company in the world, was also one of the most notable US companies to file for bankruptcy that will have an impact on the state. They operate the second largest coal mine in Colorado and filed for Chapter 11 Bankruptcy in June 2016.
Some experts say that it’s a natural regression from peak oil, and that it’s not all “doom and gloom.”Brian Lewandowski, the associate director of the University of Colorado Boulder’s Business Research Division, explained that this is simply a “little bit of consolidation” and that one company’s failure was another company’s opportunity. These bankruptcies would present an opportunity for other, more stable companies to purchase these existing operations for a low price.
Positive Signs for Colorado’s Economy
While there may be signs that filings for bankruptcy in Colorado may rise in 2017, there are positive signs for the state’s economy as well. Even the industries showing signs of risk have positive signs, and there are many sectors of the Colorado economy that are expected to grow. Colorado tourism broke all-time records in 2015 for the fifth year in a row. The Colorado Tourism Office reported that the 77 million visitors to the state spent over 19 billion dollars in 2015 and experts expect this trend to continue when the 2016 numbers are reported.
New businesses are sprouting up in Colorado while others have shuttered, epitomizing the constant ebb and flow of the economy. As technology and consumer demand feed the evolution of business, part of this growth can mean that some businesses no longer remain relevant. It is easy to understand that many big box retailers have struggled as consumers move towards online retailers. It is more difficult to understand and predict how those changes will impact the many people that own, run, and work for these businesses. The simple lesson is plan for the possibility of a leaner year even if you have lofty goals individually or for your business.